EUROPEAN COMMISSION DG Competition

Case M.8254 - HP / PRINTER BUSINESS OF SAMSUNG

ELECTRONICS

Only the English text is available and authentic.

REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 04/04/2017

In electronic form on the EUR-Lex website under document

number 32017M8254

Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

EUROPEAN COMMISSION

Brussels, 4.4.2017

C(2017) 2296 final

To the notifying party:

Subject: Case M. 8254 – HP / PRINTER BUSINESS OF SAMSUNG

ELECTRONICS

Commission decision pursuant to Article 6(1)(b) of Council

Regulation No 139/20041 and Article 57 of the Agreement on the

European Economic Area2

Dear Sir or Madam,

(1) On 28 February 2017, the European Commission received notification of a

proposed concentration pursuant to Article 4 of the Merger Regulation by which

the undertaking HP, Inc. ("HP", United States of America) acquires within the

meaning of Article 3(1)(b) of the Merger Regulation control of the whole of the

printer business of Samsung Electronics Co., Ltd ("Samsung's Printer Business",

Republic of Korea) by way of purchase of shares and assets (the "Proposed

Transaction")3. HP is referred to as the "Notifying Party" and HP and Samsung's

Printer Business are collectively referred to as "Parties".

1 THE PARTIES

(2) HP is a multinational technology company that manufactures and sells electronic

devices, including PCs and printers. HP markets inkjet and laser printers geared

1 OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on

the Functioning of the European Union ('TFEU') has introduced certain changes, such as the

replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of

the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). 3 Publication in the Official Journal of the European Union No C 71, 7.3.2017, p. 4.

PUBLIC VERSION

In the published version of this decision, some

information has been omitted pursuant to Article

17(2) of Council Regulation (EC) No 139/2004

concerning non-disclosure of business secrets and

other confidential information. The omissions are

shown thus […]. Where possible the information

omitted has been replaced by ranges of figures or a

general description.

2

towards a range of needs to consumers and businesses. HP's offerings include (a)

personal computing and other access devices; (b) imaging and printer-related

products and services.

(3) Samsung Electronics Co., Ltd is a multinational company that is a major supplier

of consumer electronic devices (including televisions, monitors, air conditioners,

refrigerators, washing machines, and printers), information technology and

mobile communication systems (including mobile phones, smartphones, and

tablets), and device solutions (such as semiconductors and mobile application

processors).

(4) Samsung's Printer Business is a global supplier of printers and printer-related

products and services for home office and business use.

2 THE OPERATION

(5) Pursuant to the master purchase agreement signed on 12 September 2016, HP will

acquire sole control of the Samsung's Printer Business. Specifically, the Proposed

Transaction will be carried out through an acquisition by HP of all of Samsung's

direct and indirect rights, titles and interests in and to all of the issued and

outstanding capital stock of a number of Samsung subsidiaries as well as other

assets to be transferred, including contracts, products, permits, and IP and other

rights related to Samsung's Printer Business. Upon completion of the Proposed

Transaction, Samsung's Printer Business will be a wholly-owned subsidiary of

HP.

(6) Therefore, the Proposed Transaction constitutes a change of control pursuant to

Article 3(1)(b) of the Merger Regulation.

3 EU DIMENSION

(7) The undertakings concerned have a combined aggregate world-wide turnover of

more than EUR 5 000 million (HP: EUR 46 365 million; Samsung's Printer

Business EUR […]; combined EUR […])4. Each of them has an EU-wide

turnover in excess of EUR 250 million (HP: EUR […]; Samsung's Printer

Business EUR […]), but they do not achieve more than two-thirds of their

aggregate EU-wide turnover within one and the same Member State.

(8) The notified operation therefore has an EU dimension pursuant to Article 1(2) of

the Merger Regulation.

4 RELEVANT MARKETS

4.1 Relevant product markets

(9) HP and Samsung's Printer Business are both active in the supply of branded office

automation equipment. While office automation equipement includes copiers,

4 Turnover calculated in accordance with Article 5 of the Merger Regulation.

3

printers and fax machines, the Parties overlap only in printers (namely single

function printers ("SFPs") and multi functional peripherals ("MFPs")).

Furthermore, Samsung's Printer Business and HP are also active in the upstream

market for supply of unbranded printers to other manufacturers.5

4.1.1 Supply of branded and unbranded office automation equipment

(10) In its previous decision Canon/Océ, the Commission concluded that the supply of

unbranded office automation equipment should be distinguished from the supply

of branded office automation equipment. The Commission considered that the

supply of unbranded office automation equipment relates to the upstream supply

market where original equipment manufacturers (OEM) sell office equipment

directly to other manufacturers or wholesalers who then resell this equipment

under their own brand to dealers or end customers, in competition with the

original manufacturers. The supply of branded office automation equipment

relates to the downstream supply of all equipment either manufactured and

branded or purchased on an OEM basis and rebranded by the purchaser. This

downstream supply encompasses sales of branded products, including direct sales

to end-users and indirect sales through wholesale distributors or dealers.6

(11) The Notifying Party agrees with the deliniation made in Canon/Océ between the

supply of (i) unbranded and (ii) branded printers.

(12) The market investigation in this case did not provide any new elements justifying

a departure from Commission's previous decisions.

(13) In line with its previous decisional practice, for the purpose of this decision, the

Commission considers that the supply of branded office automation equipment

belongs to a separate relevant market than that of the supply of unbranded office

automation equipment.

4.1.2 Large format printers and regular format printers

(14) The Commission in previous decisions distinguished the regular format printers

which use A3 and A4 papers from the large format printers which function on A2

or larger papers and other supports.7

(15) The Notifying Party agrees that large format printers should be viewed as a

separate market and submits that end applications in large format (printing

signage and display items, computer aided design or graphic arts) are different

from the ones in regular format (for use in home and office). Further, it submits

that Samsung's Printer Business does not produce or sell any large format printers

(A2 or larger).

(16) In line with its previous decisional practice, for the purpose of this decision, the

Commission considers that the supply of large format printers should be

distinguished from the supply of regular format printers.

5 However, the Parties do not sell branded office automation equipment of third party manufacturers and

therefore are not active in the wholesale distribution of branded printers. 6 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 9 and 11. 7 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 13 and 14.

4

4.1.3 Supply of regular format printers

(17) The Notifying Party submits that the relevant product market is the market for

regular format printers, without a need for futher segmentation by functionality

(SFPs vs MFPs), colour (mono vs colour) and speed. The Notifying Party claims

that significant price and technology convergence has taken place between low,

medium and high speed printers, SFPs and MFPs, and between mono and colour

printers. The Notifying Party considers that parameters such as speed, colour and

other functionalities are just elements of one market for regular format printers

and that there are a number of supply-side considerations which make such

potential segmentations irrelevant.

(18) The Notifying Party argues that from the demand side perspective, purchasers of

one type of regular format printer regularly consider and switch to alternative

printers from other segments in the market. The Notifying Party argues that

customers view printers of different functionalities, colour or mono, or different

speeds as interchangeable and that one of the reasons is that the difference of cost

per page between different types of printers has progressively decreased due to

technological developments and innovation in the industry. The Notifying Party

claims that today the average cost per page is similar across printer types.

(19) From the supply side perspective, the Notifying Party argues that printer suppliers

are able to switch production across the various segments of the regular format

printers market in the short term and without incurring significant incremental

costs. Finally, the Notifying Party claims that due to the commonality of assets,

most of regular format printer manufacturers offer a wide range of printer models

across all segments.

(20) The Commission has assessed during its investigation the various possible

segmentations retained previously (SFPs vs MFPs; mono vs colour; slow,

medium and fast printers) and whether a segmentation by paper size A3 vs A4

would be appropriate.

4.1.3.1 Single function vs. Multifunctional office equipment

(21) Within regular format office authomation equipment (A3/A4 paper size), the

Commission found in previous decisions that a distinction could be made between

single function office equipment (SFPs) and multifunctional peripherals (MFPs).8

With regard to single function devices, the Commission considered that

photocopiers, printers and fax machines may constitue three distinct product

markets.9 In the most recent decision Xerox/ Affiliated computer services the

Commission noted that the market investigation indicated the customer needs in

the printing business are rapidly evolving and, among other things, the increasing

displacement of single function devices by multifunction peripherals.10 However,

it ultimately left the market definition open.

8 Commission decision in Case M.5672 Canon/Océ, of 22 December 2009, paragraphs 16 – 19.

9 Commission decision in Case M.4434 Ricoh/Danka of 8 December 2006.

10 Commission decision of 19 January 2010 in Case COMP/M.5666 Xerox/ Affiliated computer services,

paragraphs 20-29

5

(22) SFPs are products that are only able to execute one particular task, while MFPs

combine at least two of the following functions: copy, scan, print and fax. The

Notifying Party submits that the Parties do not supply single function fax

machines. Only HP supplies single function copiers. The only single function

device in which the Parties are both active is printers. The Parties both supply

MFPs with a printing function.

Notifying Party's view

(23) The Notifying Party submits that today any segmentation between SFP and MFP

printers would be without basis. The Notifying Party submits that between 2000

and 2016 SFPs have been gradually displaced by MFPs and that by 2016 the

prices of MFPs and SFPs have effectively converged. The Notifying Party argues

that one of the reasons for this convergence is that companies often use exactly

the same engine for their SFPs and MFPs. The Notifying Party submits that

according to the IDC11 market intelligence in the overall regular format printers

market the ratio went from 7% vs 93% (MFPs vs SFPs) in 2000 to 81% vs 19%

(MFPs vs SFPs) in 2016.

Commission's assessment

(24) Based on the results of the market investigation and the data provided by IDC, the

Commission notes that, indeed, there has been a trend in the market of SFPs being

displaced by MFPs and the distinction between these two types of printers

appears to be losing its importance.

(25) From a demand side perspective, nearly all customers who responded to market

investigation source both SFPs and MFPs, while a couple of customers source

only MFPs.12 Furthermore, nearly all distributors, resellers and retailers that

responded to market investigation currently distribute both SFPs and MFPs, while

only a few stated that they distribute only MFPs.13 Business customers and

distributors replying to market investigation confirmed that customers consider as

important that the printers have additional functionalities beside printing, such as

scanning.14 Some of the business customers indicated that some business

processes require additional functionalities where MFPs enable the reduction of

devices and leads to efficiencies.15 Furthermore, a few distributors, resellers and

retailers observed a decline in SFPs with more demand being driven to MFPs as

customers require greater functionality.16

(26) From a supply-side perspective, all competitors that responded to market

investigation provide both SFPs and MFPs.17

11 International Data Corporation is a provider of market intelligence for the information technology,

telecommunications and consumer technology markets. 12 Questionnaire Q2 to customers, question 13. 13 Questionnaire Q3 to distributors, resellers, retailers, question 16. 14 Questionnaire Q2 to customers, question 14; Questionnaire Q3 to distributors, resellers, retailers,

question 17. 15 Questionnaire Q2 to customers, question 14.1. 16 Questionnaire Q3 to distributors, resellers, retailers, question 17.1. 17 Questionnaire Q1 to competitors question 18.

6

(27) Based on the results of the market investigation, the Commission takes the view

that the distinction between SFPs and MFPs is increasingly blurred, due in

particular to the trend whereby SFPs are gradually replaced by MFPs.

(28) However, for the purpose of this decision, the exact product market definition can

be left open, since the Proposed Transaction does not raise serious doubts as to its

compatibility with the internal market under any plausible market definition.

4.1.3.2 Mono (black & white) vs. colour regular format printers

(29) In past decisions, the Commission found that a distinction could be made between

black and white and colour office automation equipment.18 In the most recent

decision, the Commission also noted that the market investigation indicated that

customer needs in the printing business are rapidly evolving and that there is an

increasing displacement of Mono devices by Colour devices.19 As all colour

devices have the capability to print in black and white, and costs of both types of

devices converge, the distinction between the two is becoming increasingly

blurred.20 The Commission however ultimately left the market definition open.

Notifying Party's view

(30) The Notifying Party submits that today any segmentation between Mono and

Colour printers would be without basis in view of the significant technology and

price convergence and the displacement of Mono by Colour printers. The

Notifying Party submits that the price gap between Mono and Colour devices has

reduced between 2000 and 2016 both in the overall regular format printers and in

the low speed segment. In addition, the Notifying Party submits that according to

IDC market intelligence colour printers represent 80% of sales of regular format

printers and in the slow speed segment their proportion increased to 96% by 2016.

Commission's assessment

(31) Based on the results of the market investigation and the data provided by IDC, the

Commission notes that indeed there has been a trend in the market of mono

printers being gradually replaced by colour printers, in particular in the slow

speed segments. As a result, the distinction between these two types of printers is

losing its importance.

(32) Furthermore, from the demand side perspective, all customers that responded to

market investigation currently source both colour and mono regular format

printers.21 All distributors, resellers and retailers that responded to the market

investigation currently distribute both colour and mono regular format printers,

with exception of one who supplies only colour printers.22 Almost half of the

respondents who provided meaningful response indicate that colour printers

represent between 80 – 100 % of their sales of regular format printers.23 For the

18 Commission decision in Case Konica/Minolta; Commission decision in Case M.5672 Canon/Océ. 19 Commission decision in Case M.5666 Xerox/ Affiliated computer services. 20 Commission decision in Case M.5666 Xerox/ Affiliated computer services. 21 Questionnaire Q2 to customers, question 15. 22 Questionnaire Q3 to distributors, resellers, retailers, question 18. 23 Questionnaire Q3 to distributors, resellers, retailers, question 18.2.

7

majority of business customers, colour printers represent an important percentage

of their printers purchase (in general 30 to 50% and in some cases over 70% of

their regular format printer purchases).24 The capability to use colour devices also

to print in black and white is reflected in a sourcing policy of a customer which

explains "New printer fleet with as low number of printers as possible is only

having color printers in offices to fulfill the print policy."25

(33) The Commission also notes that from a demand side perspective the cost-per-

page of mono and colour printers which used to be one of the major differences

between mono and colour printers a few years ago is effectively converging, in

particular in the slow printer segment as shown by Figure 1:

Figure 1 - Convergence of cost-per-page mono and colour

(34)

(35) From a supply-side perspective all competitors responding to the market

investigation explained that they supply both mono and colour regular format

printers.26 While the market investigation was mixed as to the question whether

from a supply side perspective manufacturers could easily switch production from

mono to colour printers, the Commission also notes that color printers are able to

and may be used by customers to print also black and white.27

(36) For the above reasons and for the purpose of this decision, the Commission

considers that the supply of mono (black and white) and of colour regular format

printers belong to the same relevant product market.

4.1.3.3 Speed ranges

(37) In previous decisions, the Commission considered a further distinction into

segments based on speed measured by the output of pages per minute (ppm)

namely personal devices (speed up to 10 or 20 ppm for mono and up to 20 ppm

for colour), office devices (speed between 11-20 and 90 ppm for mono and 20 –

24 Questionnaire Q2 to customers, question 15.2. 25 Questionnaire Q2 to customers, question 15.1. 26 Questionnaire Q1 to competitors, question 20. 27 Questionnaire Q1 to competitors, question 21 and 21.1.

8

50 ppm for colour) and commercial/production devices (speed over 90 ppm for

mono and above 50 for colour).28 In Canon/Océ the Commission noted that due to

demand and supply side substitutability the exact demarcation of the

segmentation should not be applied rigidly. Customers responding to the market

investigation in that case indicated that they could switch between different

segments in case of a price increase, while competitors responded that an

adjustment of the speed downwards would be possible, an increase however is

limited to 10ppm.29 In the most recent case the Commission noted that the market

investigation indicated that customer needs in the printing business are rapidly

evolving which makes narrow segmentation difficult and limits its usefulness for

a prospective analysis.30 The Commission ultimately left the product market

definition open.

Notifying Party's views

(38) The Notifying Party submits that any segmentation based on speed would not be

appropriate. The Notifying Party argues that suppliers offer various models of

regular format printers that compete over a continuum of printers speeds. The

Notifying Party claims that due to technological developments, speed has become

a less relevant distinguishing factor. Speed is only one of the many determinants

of printer prices. For a given printer speed, printer prices can vary depending on

other characteristics of a model. Furthermore, it argues that the average speed of

all regular format printers has increased in recent years.

(39) The Notifying Party further submits that there is no uniformly applicable industry

standard for segmenting the regular format printers market in terms of speed. The

Notifying Party argues that each manufacturer uses different criteria to segment

their products offerings, measure performance and identify gaps vis-à-vis

competitors's products. It also argues that due to technological development and

evolution of the products, ranges are constantly adjusted and recalibrated.

Commission's assessment

(40) Based on the market investigation, the Commission considers that the boundaries

of speed ranges of regular format printers are blurred.

(41) First, the market investigation confirmed that there is no uniform standard how

different speed ranges are grouped together and no clear lines between segments

based on speed. Competitors, customers, distributors, resellers and retailers have a

different view of what the speed ranges are for each (slow, medium, fast)

segment.31 IDC ranges represent just an indicative way for printer manufacturers

to classify their printers for statistical purposes.

28 Commission decision in Case M.3091 Konica/Minolta; Commission decision in case M.5672

Canon/Océ.

29 Commission decision in Case M.5672 Canon/Océ.

30 Commission decision in case M.5666 Xerox/ Affiliated computer services, paragraph 27.

31 Questionnaire Q2 – to customers, question 11; replies to Q1 – questionnaire to competitors, question

14; replies to Q3 – questionnaire to distributors, resellers, retailers, question 11.

9

(42) The majority of customers, distributors, resellers and retailers indicated that

printer speed is one criterion for a customer when selecting a printer, however,

not among the most important ones .32

(43) Some competitors argued that an adjustment of the printer speed upwards or

downwards would be possible.33 Moreover one competitor stated that it has

already implemented such adjustments:"[] did it since years, first from higher to

lower, then from lower to higher."34 Moreover, the majority of competitors and

distributors indicated that printers can be programmed (via a software action) to

print slower than originally designed.35

(44) However, for the purpose of this decision, the exact product market definition can

be left open, since the Proposed Transaction does not raise serious doubts as to its

compatibility with the internal market under any plausible market definition.

4.1.3.4 A3/A4 regular format printers

(45) The Commission also looked into the possible segmentation of printers by page

format (that is to say, A3 printers and A4 printers), a segmentation that it had not

analysed before.

The Notifying Party's views

(46) The Notifying Party argues that A3 and A4 printers are functionally

interchangeable, with exception for A4 printers of not printing on A3 pages. The

Notifying Party submits that A3 printers have certain features which traditionally

distinguished them from A4 printers such as security, stapling/finishing,

input/output tray capacity, duty cicle, service/intervention rates. However, the

Notifying Party argues that there is increasing convergence between A3 and A4

printers features, particularly in terms of security features, printer speed, paper

handling and finishing accessories and engine designs optimized for service based

models (high duty cycle, lower intervention rate).

(47) The Notifying Party argues that interchangeability of A3 and A4 printers is

particularly strong in the office environment. It argues that business customers

typically operate a fleet of A3 and A4 printers and adjust their printing production

by switching between the two formats. It also argues that in the context of an

increasing trend for efficient fleet management and device consolidation, A3 and

multiple A4 printers are viewed as substitutable. The Notifying Party also submits

that there is a constant increase of A3 printer sales and decline of A4 printers

which currently represent around 90% of all printers sold. It also argues that more

than 90% of all pages printed by A3 printers is in A4 format.

32 Questionnaire Q2 to customers, questions 12 and 19; Questionnaire Q3 to distributors, resellers,

retailers, question 12 and 23.

33 Questionnaire Q1 to competitors, questions 15 – 17.

34 Konica Minolta's answer to Questionnaire Q1 to competitors, question 15.1.

35 Questionnaire Q1 to Competitors, question 17, and to Questionnaire Q3 to distributors, resellers and

retailers, question 15.

10

Commission's assessment

(48) Based on the results of the market investigation, the Commission has indications

that A3 and A4 printers appear to be rather complementary than substitutes.

(49) From the demand-side perspective, nearly all customers who responded to market

investigation indicated that they consider A3 and A4 printers as complementary

products.36 Some customers who responded to the market investigation indicated

that both A3 and A4 are needed for different business needs. The majority of

distributors, resellers and retailers which responded to market investigation

indicated that their customers see A3 and A4 regular format printers as

complementary products. However, some indicated that A3 and A4 could be

considered as substitues as A3 regular format printers can print both formats.37

(50) From a supply side perspective, all the competitors who responded to market

investigation supply both A3 and A4 regular format printers.

(51) However, for the purpose of this decision, the exact product market definition can

be left open, since the Proposed Transaction does not raise serious doubts as to its

compatibility with the internal market under any plausible market definition.

4.2 Relevant geographic market

4.2.1 Branded Regular format printers.

(52) In previous decisions the Commission left the geographic market definition for

branded regular format printers open.38 In the most recent decision Xerox/

Affiliated computer services the market investigation indicated that the markets

for document production equipments is worldwide or at least EEA-wide scope.39

The Notifying Party's view

(53) The Notifying Party considers the relevant geographic market for regular format

printers is at least EEA wide in scope for the following reasons:

(54) First, the Parties and other major equipment manufacturers are multinational

corporations with manufacturing facilities in Asia and other countries from where

they ship their products around the world. Second, manufacturers of regular

format printers generally price on an EEA or even wider basis following standard

price lists. Product characteristics do not vary significantly in the EEA or

throughout the world. Third, there are no quota restraints or other material trade

barriers. HP's top 10 distributors in the EEA resell regular format printers in

36 Questionnaire Q2 to customers, question 7.

37 Questionnaire Q3 to distributors,resellers, retailers, question 7 and 7.1.

38 Commission decision of 22 December 2009 in Case M.5672 Canon/Océ, paragraphs 41 – 47;

Commission decision of 19 January 2010 in Case M.5666 Xerox/ Affiliated computer services,

paragraph 30 - 33.

39 Commission decision of 19 January 2010 in Case M.5666 Xerox/ Affiliated computer services,

paragraph 32.

11

multiple countries and some of them have one warehouse serving several

countries.

Commission's assessment

(55) Based on the market investigation, the Commission considers that there are strong

indications that the market for branded regular format printers is wider than

national or even EEA-wide.

(56) From a demand-side perspective, business customers stated they source on EEA

wide level with country specific conditions and specifications or at the national

level.40 However, several customers indicated that they already procure regular

format printers EEA wide with equal conditions across EEA.41 Business

customers also indicated that there are no differences in customer requirements in

the different countries within the EEA.42

(57) On the other hand, the replies of distributors, resellers and retailers received

during the market investigation were mixed. A large number of distributors,

resellers and retailers which responded to market investigation source regular

format printers on a national level.43 However, several indicated that they source

on EEA or worldwide level.44 In respect of their customers, while the majority of

respondents indicate that their customers source on country by country level,

some respondends indicate certain customers source on EEA level.45 The majority

of respondents which provided meaningful responses consider that there are no

differences in customer requirements for regular format printers in different

countries within the EEA.46

(58) From a supply-side perspective, all the competitors that responded to market

investigation indicated that they provide or are able to provide regular format

printers throughout the EEA and do not observe restrictions or barriers for supply

into any EEA country.47 They also indicated that there are no differences in

customer requirements in the different countries within the EEA.48

(59) In conclusion, in spite of the fact that current sourcing patterns are usually at

national level, there are clear indications that the relevant markets are wider than

national or even EEA wide.

(60) However, for the purpose of this decision, the exact geographic market definition

can be left open, since the Proposed Transaction does not raise serious doubts as

to its compatibility with the internal market under any plausible market definition.

40 Questionnaire Q2 to customers, question 17. 41 Questionnaire Q2 to customers, question 17. 42 Questionnaire Q2 to customers, question 18. 43 Questionnaire Q3 to distributors,resellers, retailers, question 20. 44 Questionnaire Q3 to distributors,resellers, retailers, question 20. 45 Questionnaire Q3 to distributors,resellers, retailers, question 21. 46 Questionnaire Q3 to distributors,resellers, retailers, question 22. 47 Questionnaire Q1 to competitors, questions 25 - 26.1. 48 Questionnaire Q1 to competitors, questions 24.

12

4.2.2 Unbranded regular format printers

The Notifying Party's view

(61) The Notifying Party submits that the market for unbranded regular format printers

is worldwide. Customers for unbranded OEM printers are large, multinational

printer manufacturers with global procurement practices which source these

products worldwide. In addition, suppliers of unbranded printers ship those

globally from a few locations worldwide.

Commission's assessment

(62) The Commission, based on the market investigation, considers that there are

indications that the market for unbranded regular format printers could be at least

EEA-wide. Indeed, during the market investigation suppliers confirmed that they

ship printers in all countries of the EEA.49

(63) However, for the purpose of this decision, the exact geographic market definition

can be left open, since the Proposed Transaction does not raise serious doubts as

to its compatibility with the internal market under any plausible market definition.

5 COMPETITIVE ASSESSMENT

(64) The activities of the Parties overlap horizontally on the market for the supply of

branded regular format printers. Furthermore, as the Parties supply unbranded

regular format printers to other manufacturers on an OEM basis and purchase

unbranded regular format printers, the Proposed Transaction gives rise to vertical

relationships between the downstream market for the supply of branded regular

format printers and the upstream market for the supply of unbranded regular

format printers.

5.1 Horizontal non-coordinated effects

5.1.1 Supply of branded regular format printers

(65) On the overall market for the supply of branded regular format printers, the

Proposed Transaction does not give rise to affected markets, either at worldwide

level or at EEA level. At worldwide level, the Parties' combined market share in

2016 would be [10-20]% (HP: [10-20]%; Samsung's Printer Business: [0-5]%).

At EEA level, the Parties' combined market share in 2016 would be [10-20]%

(HP: [10-20]%; Samsung's Printer Business: [0-5]%). The market share data

provided in this section is based on IDC data.

(66) Based on 2016 market shares50, on the overall market for branded regular format

printers, the Proposed Transaction gives rise to 14 national affected markets.

However, in most of these national markets, the merged entity's share would be

49 Questionnaire Q1 to competitors, question 25.

50 The Notifying Party was unable to provide separate data for the Baltic countries, Czech Republic,

Slovakia and UK and Ireland, as IDC reports do not report separately for these countries.

14

worldwide and EEA level. On the worldwide market, HP was only the fourth

largest supplier and Samsung Printer Business ranked as the 11th

largest supplier

in 2016, while in the EEA, HP ranked as the third largest supplier and Samsung

Printer Business as the 10th

largest supplier.

(68) Second, the Notifying Party notes that Samsung Printer Business is not a

significant competitive constraint to HP, as it is only one of the many competitors

in branded regular format printers and that moreover, its position in the EEA has

steadily declined both in terms of revenues and in terms of unit sales in the last

few years.

(69) Third, the Notifying Party argues that due to the characteristics of these products,

the way in which they are produced and sold, and the fact that many competitors

already have a number of printer models sold in the various segments, barriers to

entry and expansion in these markets are low. The Notifying Party also argues

that the investments required to expand into adjacent segments (for example

printers of different speeds) are limited and can be completed in a short time.

Further, it claimes that any supplier can viably enter or expand into any segment

of regular printers market by sourcing on OEM basis without incurring significant

initial costs or risks.

(70) Furthermore, should the merged entity raise prices, companies such as Ricoh,

Xerox or Konica Minolta would be well positioned to expand and reposition their

product offering in response to a post-merger price increase. Furthermore, most

regular format printer manufacturers are able and do offer a wide range of printer

models across all possible segments (SFPs, MFPs, mono, colour, and different

speed ranges).

(71) Fourth, the Notifying Party submits that due to low switching costs and strong

countervailing buyer power, customers at various levels of the distribution chain

can and do easily and timely switch to alternative sources of supply of branded

regular format printers. In terms of buyer power, the Notifying Party notes that

over […]% of the Parties' sales are made through large multinational distributors

and/or retailers that have significant buyer power, which they will exert in the

event of any increase by the merged entity. Companies such as […] and […], are

sophisticated buyers that exert substantial countervailing bargaining power and

can switch easily between competing products.

(72) Finally, in relation to the affected national markets, in particular Greece and the

Baltics where the merged entity's market share would be higher than 30% on the

overall regular format printers market, the Notifying Party submits that the

merged entity will continue to face competition from the same suppliers as at

EEA-level. Furthermore in the Baltics, Samsung's Printer Business share has

decreased [as a result of a strategic decision on market positioning].

5.1.1.2 Commission's assessment

(73) The Commission considers that the Proposed Transaction is unlikely to raise

doubts as to its compatibility with the internal market in the overall market for

branded regular format printers for the following reasons:

(74) According to Commission's Guidelines on the assessment of horizontal mergers

under the Council Regulation on the control of concentrations between

15

undertakings (the "Horizontal Guidelines")52 , combined market shares below

25% may indicate that the concentration is not likely to impede effective

competition. The Commission first notes that both at world-wide level, as well as

at EEA-level, the Proposed Transaction will not give rise to affected markets: the

merged entity's share at worldwide level was [10-20]% and at EEA-level [10-

20]% in 2016. Further, in 2016, on the overall worldwide market for branded

regular format printers there were many suppliers present, such as Xerox ([10-

20]%); Canon ([10-20]%); Ricoh ([10-20]%); Konica Minolta ([10-20]%),

Kyocera ([5-10]%), Epson ([0-5]%); Sharp ([0-5]%), Toshiba ([0-5]%), Brother

([0-5]%), Lexmark ([0-5]%), Oki ([0-5]%). The same suppliers were active in

2016 in the EEA: Xerox ([10-20]%); Canon ([10-20]%); Ricoh ([10-20]%);

Konica Minolta ([10-20]%), Kyocera ([5-10]%), Epson ([0-5]%); Sharp ([0-5]%),

Toshiba ([0-5]%), Brother ([0-5]%), Lexmark ([0-5]%), Oki ([0-5]%).

(75) Second, the majority of respondents to the market investigation do not consider

HP and Samsung's Printer Business as particularly close competitors. In

particular, business customers and distributors, resellers and retailers view other

suppliers such as Canon, Xerox, Brother and Epson closer to HP than Samsung's

Printer Business.53 In turn, only three of these respondents considered HP as the

closest competitor to Samsung's Printer Business and only for some of the

possible segments. Competitors' views on this issue were more mixed, but in

general, HP is perceived as a rather high-end, more expensive product supplier,

whose brand is widely recognised in the market, while Samsung's Printer

Business is perceived more as a mass-market, consumer brand.54 The fact that

Samsung's Printer Business products seem to address more consumers' segment,

rather than large business customers is demonstrated by the fact that a non-

negligible number of business customers indicating that they do not purchase

printers from Samsung's Printer Business or that they have not yet evaluated

Samsung's printers.55 Some customers pointed out that the product portfolios of

the two companies are complementary, as HP is specialised more in A4 printers

and Samsung in A3 printers and the two companies employ different technologies

(HP mainly inkjet and Samsung's Printer Business mainly laser)56. Market

investigation respondents did not consider that Samsung's printer portfolio, and in

particular its line of A3 printers is in any way superior in terms of functionality

and performance to those of other suppliers.57

(76) Third, the large majority of participants to the market investigation confirmed that

a sufficient number of competitors will continue to compete in the overall market

52 OJ 2004/C 31/03.

53 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers

and resellers, question 31.

54 Questionnaire Q1 to competitors, questions 28 and 32.

55 Questionnaire Q2 to business customers question 27.

56 Questionnaire Q3 to distributors, retailers and resellers, question 33.

57 Questionnaire Q1 to competitors, question 33, Questionnaire Q2 to business customers, question 30,

and Questionnaire Q3 to distributors, retailers and resellers, question 35.

16

for branded regular format printers both at worldwide level, as well as at EEA-

level.58 Furthermore, some respondents even signalled recent new entrants in the

EEA such as Pantum, a Chinese manufacturer and Kodak.59

(77) Fourth, the vast majority of market participants did not consider that the Proposed

Transaction will have a negative impact on the market for branded regular format

printers or on prices of branded regular format printers.60

(78) For these reasons, the Commission takes the view that the Proposed Transaction

does not raise serious doubts as regards its compatibility with the internal market

in relation to the supply of branded regular format printers worldwide and in the

EEA.

(79) Furthermore, in relation to the national affected markets identified in Table 1, the

Commission first notes that in most of these markets, the merged entity's market

share remains below 30%.

(80) Second, the Commission considers that the merged entity will continue to face

strong competition from the same competitors active at EEA level. Indeed,

suppliers such as Konica Minolta, Ricoh, Canon, Xerox, Kyocera, Brother,

Epson, Lexmark, Sharp are present in each EEA country.

(81) In the Baltics, the Commission first notes that Samsung's Printer Business is a

declining competitor, whose market share has indeed decreased from [10-20]% in

2013 to [5-10]% in 2016, while other competitors have expanded and increased

their market share: Kyocera has increased its market share from [10-20]% in 2013

to [10-20]% in 2016, Canon from [5-10]% in 2013 to [10-20]% in 2016, and

Konica Minolta from [10-20]% in 2013 to [10-20]% in 2016, which shows that

other suppliers indeed have the capacity and willingness to expand. Furthermore,

as explained in paragraph 58, competitors consider that they are able to supply in

all countries in the EEA. Second, the Commission considers that in the Baltics the

merged entity would continue to face strong competition from many competitors,

such as Kyocera ([10-20]%), Canon ([10-20]%), Konica Minolta ([10-20]%),

Lexmark ([0-5]%), Xerox ([0-5]%), Epson ([0-5]%) and Brother ([0-5]%) among

others.

(82) As regards Greece, while Samsung's Printer Business share has remained stable

over the last three years, the merged entity would continue to compete against a

large number of competitors, including Ricoh ([10-20]%), Konica Minolta ([10-

20]%), Xerox ([10-20]%), Epson ([5-10]%), Canon ([5-10]%), Kyocera ([5-

10]%) among others. Some of these competitors have considerably increased their

market share over the last few years, showing their ability and willingness to

expand in the market. These include Ricoh (which has increased its market share

58 Questionnaire Q2 to business customers, question 23; Questionnaire Q3 to distributors, retailers and

resellers, question 29.

59 Questionnaire Q1 to competitors, question 34; Questionnaire Q2 to business customers question 31

and Questionnaire Q3 to distributors, retailers and resellers, question 35.

60 Questionnaire Q1 to competitors, questions 41-42; Questionnaire Q2 to customers, questions 33-34;

Questionnaire Q3 to distributors, retailers and resellers, questions 38-39.

17

from [0-5]% in 2013 to [10-20]% in 2016), Kyocera (from [0-5]% in 2013 to [0-

5]% in 2016) and Epson (from [0-5]% in 2013 to [5-10]% in 2016). Furthermore,

as explained in paragraph 58, competitors consider that they are able to supply in

all countries in the EEA.

(83) Finally, participants to the market investigation did not raise any specific

concerns in relation to the impact of the Proposed Transaction on branded regular

format printers in these countries.61

(84) For all these reasons, the Commission takes the view that the Proposed

Transaction does not raise serious doubts as regards its compatibility with the

internal market in relation to overall branded regular format printers worldwide,

in the EEA and in each of the Baltics, Bulgaria, Croatia, Czech Republic,

Slovakia, Greece, Hungary, the Netherlands, Poland, Romania, Slovenia and

Spain.

5.1.2 Supply of branded regular format printers by narrower product segments

(85) Under possible narrower markets for the supply of branded regular format

printers, the Proposed Transaction gives rise to affected markets at worldwide,

EEA-wide level and national level.

5.1.3 SFPs and MFPs

5.1.3.1 Worldwide and EEA-wide markets

(86) At worldwide level, the Proposed Transaction would give rise to an affected

market in relation to certain potential segments of SFPs and MFPs as presented in

Table 2.

61 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;

Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.

19

5.1.3.2 The Notifying Party's views

(88) Specifically in relation to SFPs and MFPs, the Notifying Party first submits that

the Parties only overlap in colour SFPs and MFPs since Samsung's Printer

business does not offer slow speed mono printers.

(89) Second, the Notifying Party argues that the Samsung's Printer Business does not

exercise a significant competitive constraint on HP. In particular, in the low speed

segment SFPs and MFPs, Samsung's Printer Business is a small and declining

competitor, [as a result of a strategic decision on market positioning]. The

Target's share in colour, low-speed SFPs in the EEA has declined significantly

over the past few years (from [10-20]% in 2013 to [5-10]% in 2016). Its share has

also dropped as regards colour, low speed MFPs (from [5-10]% in 2013 to [0-5]%

in 2016). Similarly, in medium speed SFPs and MFPs, Samsung's Printer

Business position is de minimis and declining.

(90) Third, the Notifying Party argues that in all these hypothetical segments, the

merged entity will continue to face competition from a number of well-

established players, such as Canon, Epson and Brother, who have been growing

significantly. Canon and Epson for instance are the strongest competitors in the

EEA in the low and medium speed segments of SFPs and MFPs.

(91) Finally, the Notifying Party considers that printer suppliers can easily expand

from the higher speed segments into the lower speed segments, as IP and know-

how specific to those products are limited. The Notifying Party gives the example

of "copier" players such as Ricoh, Konica Minolta, Toshiba or Xerox which are

well-positioned to expand in the lower segments. Toshiba, Kyocera and Sharp

have already introduced products to compete in these segments in the last 2-3

years. Similarly, suppliers can easily expand geographically to serve

neighbouring countries, if they do not already have a presence in a specific

country.

5.1.3.3 Commission's assesment

(92) The Commission considers that the Proposed Transaction will not raise serious

doubts as regards its compatibility with the internal market in relation to these

segments worldwide and in the EEA for the following reasons:

(93) The Commission first observes that the SFPs segment is today limited, both at

world-wide level, as well as at EEA-level. According to the IDC market

intelligence in the overall regular format printers market, the ratio of MFPs versus

SFPs went from 7% vs 93% (MFPs v SFPs) in 2000 to 81% vs 19% (MFPs v

SFPs) in 2016, as illustrated in Figure 2. The Commission had already observed

this trend in previous decisions.63

63 See Commission Decision in case M 5672, Canon/Oce, of 22.12.2009, paragraph 17.

20

Figure 2 - SFPs dispacement by MFPs

(94) These figures support the assertions of the Notifying Party concerning the trend of

SFPs being gradually displaced by MFPs. As indicated in paragraphs (23) and

following, participants to the market investigation confirmed this displacement of

SFPs. For instance, distributors confirmed that MFPs represent today 80 to 85%

of the sales of printers and that customers (including end consumers) require more

functionalities than just printing in the device they choose to purchase.64

Therefore, the SFPs segment appears to be shrinking and losing in importance,

not only for business customers, but also with consumers.

(95) Second, the Commision notes that only the slow and medium speed segments of

SFPs and MFPs are horizontally affected. The Parties' presence in fast SFPs and

MFPs is limited.

(96) Third, the Commission observes that irrespective of the possible speed

segmentation within SFPs and MFPs, the merged entity's market share would

remain under 50%, and that other strong suppliers such as Canon, Epson, Brother,

Kyocera, Lexmark or Xerox will continue to exercise competitive pressure on the

merged entity in all these potential segments.

(97) Fourth, the majority of respondents to the market investigation did not indicate

HP and Samsung’s Printer Business as particularly close competitors neither in

SFPs, nor in MFPs.65

(98) Fifth, the vast majority of market participants did not consider that the Proposed

Transaction will have any impact on the market for the supply of branded regular

64 Questionnaire Q3 to distributors, resellers and retailers, Questions 16-17.

65 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers

and resellers, question 31.

22

50]% 50]% 30]% 20]% 10]%

France [30-

40]%

[0-5]% [30-

40]%

Canon [30-

40]%

Epson [20-

30]%

Brother [0-

5]%

Germany [40-

50]%

[5-10]% [40-

50]%

Canon [20-

30]%

Epson [10-

20]%

Brother [10-

20]%

Greece [40-

50]%

[0-5]% [40-

50]%

Epson [40-

50]%

Canon [0-

5]%

Xerox [0-

5]%

Hungary [40-

50]%

[0-5]% [40-

50]%

Epson [30-

40]%

Canon [20-

30]%

Xerox [0-

5]%

Italy [30-

40]%

[10-20]% [40-

50]%

Epson [20-

30]%

Canon [10-

20]%

Brother [10-

20]%

The

Netherlands

[20-

30]%

[10-20]% [30-

40]%

Canon [20-

30]%

Epson [20-

30]%

Brother [5-

10]%

Norway [30-

40]%

[10-20]% [50-

60]%

Epson [30-

40]%

Canon [5-

10]%

Brother [5-

10]%

Poland [50-

60]%

[0-5]% [50-

60]%

Canon [20-

30]%

Epson [10-

20]%

Ricoh [0-

5]%

Portugal [30-

40]%

[0-5]% [30-

40]%

Epson [30-

40]%

Canon [10-

20]%

Brother [0-

5]%

Romania [40-

50]%

[0-5]% [40-

50]%

Epson [20-

30]%

Canon [20-

30]%

Xerox [0-

5]%

Slovenia [60-

70]%

[0-5]% [60-

70]%

Canon [10-

20]%

Epson [10-

20]%

Xerox [0-

5]%

Spain [60-

70]%

[5-10]% [60-

70]%

Epson [10-

20]%

Canon [5-

10]%

Brother [5-

10]%

Sweden [20-

30]%

[10-20]% [30-

40]%

Canon [40-

50]%

Epson [10-

20]%

Brother [0-

5]%

UK and

Ireland

[20-

30]%

[5-10]% [20-

30]%

Epson [30-

40]%

Canon [20-

30]%

Brother [5-

10]%

Source: IDC data, 2016

(102) However, the Commission considers that the Proposed Transaction will not raise

serious doubts as regards its compatibility with the internal market in any of these

countries/regions for the following reasons:

(103) First, the merged entity's market share in the majority of these countries (Austria,

Belgium, Bulgaria, Croatia, Czech Republic, Slovakia, Denmark, Finland, France,

Germany, Greece, Hungary, Italy, The Netherlands, Portugal, Romania, Sweden,

UK and Ireland) remains under 50% and several strong competitors (among

which Ricoh, Epson, Brother and Xerox) will continue to constrain the merged

entity post-Proposed Transaction. Furthermore, in most of these countries

23

Samsung's Printer Business is a small competitor, ranking behind the top three

suppliers. Finally, none of the respondents to the market investigation raised

concerns in relation to these national markets.67

(104) Second, in the Baltics68 where the market share of the merged entity is the highest

for this segment (slightly over [70-80]%), the Commission first notes that

Samsung's Printer Business is indeed a declining competitor in this possible

segment, as it has lost significant market share over the last few years (from

almost [20-30]% in 2013 to [10-20]% in 2016). Second, the Commission

considers that the merged entity will continue to face three strong competitors

(Epson, Canon and Brother) which will be able to react promptly in case of a

price increase by the merged entity. For example, the evolution of the market

shares of Canon and Brother in the Baltic region in this possible segment shows

that these competitors would be able and willing to expand, as they have both

almost doubled their share between 2013 and 2016. Furthermore, in the other

speed segments of SFPs and MFPs there are eleven other global competitors

present in the Baltics which could potentially expand or enter the slow speed

segment as many of them have a complete portfolio of printers.69 Similarly in

Spain where the market share of the merged entity would be [60-70]%, the

Commission first notes that Samsung's Printer Business is a declining competitor

(from [5-10]% share in 2013 to [5-10]% in 2016) in this possible segment.

Second, the Commission considers that apart from the top three competitors

(Epson, Canon and Brother) there are a few other competitors active in this

segment (Ricoh, Dell and Xerox) which will continue to constrain the merged

entity post-Transaction. In particular, Epson has significantly expanded over the

last few years, its market share increasing from [5-10]% in 2013 to [10-15]% in

2016. Furthermore, the increment brought by the Proposed Transaction in Spain

would be only [5-10]%, as Samsung's Printer Business is one of the smaller

competitors behind Epson, Canon and Brother. The same considerations on

expanding or entering in the slow speed segment apply in relation to competitors

active in the medium speed segment of SFPs. Also, in Slovenia, where the market

share of the merged entity would be [60-70]%, the Commission first notes that

Samsung's Printer Business is a declining competitor (from [5-10]% market share

in 2013 to [0-5]% in 2016) in this segment. Second, the Commission considers

that there are four competitors (Epson, Canon, Xerox and Brother) which will

continue to constrain the merged entity post-Transaction. In particular, not only

Epson has significantly expanded in this possible segment over the last few years,

its market share increasing from [0-5]% in 2013 to [10-20]% in 2016, but also

Canon, which has increased its market share from [10-20]% in 2013 to [10-20]%

in 2016. Furthermore, the increment brought by the Proposed Transaction in

67 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;

Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.

68 In the Baltics, based on the turnover figures of Samsung's Printer Business for 2015, the Commission

notes that the turnover is in fact realised in one country, Latvia. Therefore Lithuania and Estonia may

not be in fact affected national markets.

69 Further, as explained in paragraphs 42, it is possible to program a printer to be slower than originally

designed.

25

Denmark [30-

40]%

[0-5]% [30-

40]%

Lexmark

[10-20]%

Brother [10-

20]%

Oki [10-

20]%

Finland [30-

40]%

[5-10]% [30-

40]%

Canon [10-

20]%

Toshiba [10-

20]%

Kyocera [10-

20]%

France [20-

30]%

[5-10]% [30-

40]%

Brother [10-

20]%

Lexmark

[10-20]%

Konica

Minolta [5-

10]%

Germany [20-

30]%

[5-10]% [20-

30]%

Kyocera [30-

40]%

Brother [10-

20]%

Lexmark [5-

10]%

Greece [20-

30]%

[20-30]% [50-

60]%

Lexmark

[10-20]%

Oki [10-

20]%

Brother [5-

10]%

Hungary [20-

30]%

[10-20]% [30-

40]%

Kyocera [20-

30]%

Epson [10-

20]%

Oki [10-

20]%

Italy [10-

20]%

[10-20]% [30-

40]%

Lexmark

[20-30]%

Kyocera [10-

20]%

Oki [5-10]%

The

Netherlands

[30-

40]%

[5-10]% [30-

40]%

Brother [10-

20]%

Lexmark [5-

10]%

Kyocera [5-

10]%

Norway [30-

40]%

[0-5]% [40-

50]%

Oki [20-

30]%

Brother [20-

30]%

Ricoh [0-

5]%

Poland [20-

30]%

[0-5]% [30-

40]%

Kyocera [10-

20]%

Lexmark

[10-20]%

Oki [10-

20]%

Portugal [20-

30]%

[5-10]% [20-

30]%

Oki [10-

20]%

Kyocera [10-

20]%

Konica

Minolta [10-

20]%

Romania [30-

40]%

[5-10]% [30-

40]%

Lexmark

[10-20]%

Kyocera [10-

20]%

Xerox [10-

20]%

Slovenia [20-

30]%

[0-5]% [30-

40]%

Lexmark

[20-30]%

Kyocera [10-

20]%

Xerox [5-

10]%

Spain [30-

40]%

[5-10]% [30-

40]%

Brother [10-

20]%

Kyocera [10-

20]%

Ricoh [10-

20]%

Sweden [30-

40]%

[10-20]% [40-

50]%

Oki [10-

20]%

Ricoh [10-

20]%

Lexmark [5-

10]%

UK and

Ireland

[20-

30]%

[5-10]% [30-

40]%

Brother [10-

20]%

Konica

Minolta [5-

10]%

Kyocera [5-

10]%

Source: IDC data 2016

(108) However, the Commission considers that the Proposed Transaction will not raise

serious doubts as regards its compatibility with the internal market in any of these

countries for the following reasons:

27

Denmark [60-

70]%

[0-5]% [60-

70]%

Canon [20-

30]%

Brother [10-

20]%

Epson [5-

10]%

Finland [30-

40]%

[10-20]% [40-

50]%

Canon [20-

30]%

Epson [10-

20]%

Brother [10-

20]%

France [40-

50]%

[0-5]% [40-

50]%

Canon [30-

40]%

Epson [20-

30]%

Brother [0-

5]%

Germany [40-

50]%

[5-10]% [40-

50]%

Canon [30-

40]%

Epson [10-

20]%

Brother [5-

10]%

Greece [60-

70]%

[0-5]% [60-

70]%

Epson [10-

20]%

Canon [10-

20]%

Konica

Minolta [0-

5]%

Hungary [40-

50]%

[0-5]% [40-

50]%

Canon [20-

30]%

Epson [10-

20]%

Bother [0-

5]%

Italy [30-

40]%

[0-5]% [40-

50]%

Epson [20-

30]%

Canon [20-

30]%

Brother [0-

5]%

The

Netherlan

ds

[30-

40]%

[0-5]% [30-

40]%

Canon [40-

50]%

Epson [10-

20]%

Brother [5-

10]%

Norway [30-

40]%

[0-5]% [30-

40]%

Epson [30-

40]%

Brother [20-

30]%

Canon [5-

10]%

Poland [40-

50]%

[0-5]% [40-

50]%

Brother [20-

30]%

Canon [20-

30]%

Epson [10-

20]%

Portugal [50-

60]%

[0-5]% [50-

60]%

Canon [20-

30]%

Epson [10-

20]%

Brother [5-

10]%

Romania [20-

30]%

>[0-5]% >[30-

40]%

Canon [40-

50]%

Epson [20-

30]%

Brother [5-

10]%

Slovenia [40-

50]%

[0-5]% [40-

50]%

Canon [20-

30]%

Brother [10-

20]%

Epson [5-

10]%

Spain [50-

60]%

[0-5]% [50-

60]%

Epson [10-

20]%

Canon [10-

20]%

Brother [10-

20]%

Sweden [30-

40]%

[5-10]% [40-

50]%

Canon [40-

50]%

Brother [5-

10]%

Epson [5-

10]%

UK and

Ireland

[40-

50]%

>[0-5]% >[50-

60]%

Canon [30-

40]%

Epson [10-

20]%

Brother [0-

5]%

Source: IDC data, 2016

28

(112) However, the Commission considers that the Proposed Transaction will not raise

serious doubts as regards its compatibility with the internal market in any of these

countries for the following reasons:

(113) First, the merged entity's market share in the majority of these countries (Austria,

Baltics, Bulgaria, Croatia, Czech Republic, Slovakia, Denmark, Finland, France,

Germany, Hungary, Italy, The Netherlands, Norway, Poland, Romania, Slovenia,

Sweden, UK and Ireland) remains under 50% and several strong competitors

(among which Canon, Epson, Brother and Konica Minolta) will continue to

constrain the merged entity post-Transaction. Furthermore, in most of these

countries, Samsung's Printer Business is a small competitor, ranking behind the

top three suppliers.

(114) Second, in Belgium, Greece, and Denmark where the market share of the

merged entity is the highest for this segment (over 60%) the merged entity will

continue to face three strong competitors (Epson, Canon, Brother or Konica

Minolta) which will continue to constrain the merged entity. Additionally, some

other suppliers are active in this segment in Belgium (Dell and Ricoh), Denmark

(Xerox) and Greece (Ricoh, Kyocera and Xerox). Furthermore, the increment

brought by the Proposed Transaction in those countries is very limited ([0-5]% or

less).

(115) Third, in Spain and Portugal, where the merged entity's market share would be

[50-60]% and [50-60]% respectively, the Commission considers that the merged

entity will continue to face competition from Epson, Canon and Brother, but also

from Dell and Ricoh in Spain and Xerox, Konica Minolta and Kyocera in

Portugal (which are also present in this segment). Furthermore, the increment

brought by the Proposed Transaction in Spain and Portugal is very limited.

(116) Finally, none of the respondents to the market investigation raised concerns in

relation to these national markets.73

(d) Medium speed MFPs

(117) In the potential medium speed segment of MFPs, the Proposed Transaction gives

rise to 8 affected national markets in the EEA as shown in Table 7.

73 Questionnaire Q1 to competitors, questions 40-45; Questionnaire Q2 to customers, questions 32-34;

Questionnaire Q3 to distributors, retailers and resellers, questions 37-40.

31

Transaction. Distributors and resellers multi-source and often stock 3 – 4 printer

brands. Therefore, HP expects that the distributors and resellers that are currently

stocking both HP and Samsung printers, will likely [business decision]. In

addition, HP will not [transaction specific decision] and expects HP will not get

access to or be able to retail all commercial relationsips of this sales force with its

printer customers.

(126) The Notifying Party submits that in the potential A4 segment the merged entity

will continue to face strong competition from at least seven well-established

competitors with shares in the EEA between around [5-10]% and [10-20]%

(Canon, Epson , Kyocera, Brother, Ricoh, Konica Minolta and Lexmark), the

majority of which which have been increasing their EEA shares between 2013

and 2016. In the same period both HP and Samsung's Printer Business shares of

sales declined on worldwide and EEA level.

(127) The Notifying Party further argues that barriers to entry and expansion into A4

printer segment are low. The ease of entry and expansion is demonstrated by the

traditional copier manufacturers recent expansion into the A4 printer segment. As

all major players are already active in both the A3 and A4 printer segments any

price increase of A4 printers post-Transaction would increase the incentives of

competitors to further expand in this segment and would result unprofitable.

(128) The Notifying Party also argues that the switching costs are low and the

customers exert substantial countervailing bargaining power.

Commission's assesment

(129) The Commission first notes that both at world-wide level, as well as at EEA-

level, the merged entity's share remains below 40% and several strong

competitors (such as Canon, Epson, Brother, Lexmark, Ricoh, or Kyocera) will

continue to constrain the merged entity post-Transaction. Furthermore Samsung

Printer Business is a small competitor, ranking behind the top suppliers as 8th

supplier worldwide and 9th supplier in the EEA.

(130) Second, the majority of respondents to the market investigation do not consider

HP and Samsung's Printer Business as particularly close competitors. In

particular, business customers and distributors, resellers and retailers view other

suppliers such as Canon, Xerox, Brother, Epson and Lexmark closer to HP than

Samsung's Printer Business.75

(131) Third, the large majority of participants to the market investigation confirmed that

a sufficient number of suppliers of A4 format printers will continue to compete

both at worldwide level, as well as at EEA-level.76

(132) Fourth, none of the respondents to the market investigation raised concerns in

relation to this potential segment.77

75 Questionnaire Q2 to business customers, question 26 and Questionnaire Q3 to distributors, retailers

and resellers, question 31.

76 Questionnaire Q2 to business customers, question 23; Questionnaire Q3 to distributors, retailers and

resellers, question 29.

33

Germany [20-

30]%

[5-10]% [30-

40]%

Kyocera [10-

20]%

Canon [10-

20]%

Brother [10-

20]%

Greece [40-

50]%

[10-

20]%

[60-

70]%

Epson [10-

20]%

Lexmark [5-

10]%

Canon [5-

10]%

Hungary [20-

30]%

[10-

20]%

[40-

50]%

Epson [10-

20]%

Canon [10-

20]%

Kyocera

[10-20]%

Italy [20-

30]%

[10-

20]%

[30-

40]%

Epson[10-

20]%

Canon [10-

20]%

Brother [5-

10]%

The

Netherlands

[30-

40]%

[0-5]% [30-

40]%

Canon [20-

30]%

Epson [5-

10]%

Brother [5-

10]%

Norway [20-

30]%

[0-5]% [30-

40]%

Epson [10-

20]%

Canon [10-

20]%

Brother [10-

20]%

Poland [30-

40]%

[0-5]% [30-

40]%

Brother [10-

20]%

Canon [10-

20]%

Lexmark [5-

10]%

Portugal [20-

30]%

[0-5]% [20-

30]%

Canon [20-

30]%

Konica

Minolta [5-

10]%

Epson [5-

10]%

Romania [30-

40]%

[5-10]% [40-

50]%

Canon [10-

20]%

Xerox [5-

10]%

Epson [5-

10]%

Slovenia [40-

50]%

[0-5]% [40-

50]%

Canon [10-

20]%

Kyocera [10-

20]%

Lexmark [5-

10]%

Spain [30-

40]%

[0-5]% [30-

40]%

Kyocera [10-

20]%

Ricoh [10-

20]%

Brother [10-

20]%

Sweden [20-

30]%

[5-10]% [30-

40]%

Canon [20-

30]%

Ricoh [10-

20]%

Brother [5-

10]%

UK and

Ireland

[30-

40]%

[0-5]% [30-

40]%

Canon [10-

20]%

Epson [10-

20]%

Ricoh [5-

10]%

(135) The Commission considers that for the reasons set out below, the Proposed

Transaction does not raise serious doubts as regards its compatibility with the

internal market in relation to A4 regular format printers at the national level:

(136) First, in all countries considered, the combined market share of the Parties would

remain below 50% and several strong competitors would remain in each of these

countries post-Transaction, which will exert competitive pressure on the merged

entity (including, depending on the country, Brother, Canon, Epson, Kyocera,

Lexmark, Ricoh, Xerox and other players). Further, in most countries (Austria,

Bulgaria, Czech Republic / Slovakia, Finland, France, Germany, Hungary, Italy,

the Netherlands, Norway, Poland, Spain Sweden, and the UK / Ireland) the

combined market shares of the Parties would remain below 40% and in Austria,

France and Portugal below 30%.

34

(137) The only country where the combined market share of the Parties would exceed

50% is Greece. However, even in Greece, several competitors will remain post-

Transcation which will continue to constrain the Parties, including Epson ([10-

20]%), Oki ([0-5]%) and Lexmark ([5-10]%). Other players on this potential

market include Canon ([0-5]%), Ricoh ([0-5]%), Xerox ([0-5]%), Konica Minolta

([0-5]%), Kyocera ([0-5]%) and Brother ([0-5]%).

5.1.4.3 Conclusion on the potential segment of A4 regular format printers

(138) For all these reasons, the Commission considers that the Proposed Transaction

does not raise serious doubts as regards its compatibility with the internal market

in relation to A4 regular format printers world-wide, in the EEA and at national

level.

5.2 Vertical effects

(139) The Proposed Transaction would give rise to several vertical relationships. In

particular, the Parties are both active upstream as suppliers of unbranded (OEM)

regular format printers and as suppliers of branded regular format printers.

(140) According to the Non-Horizontal Merger Guidelines, foreclosure occurs when

actual or potential rivals’ access to supplies or markets is hampered, thereby

reducing those companies’ ability and/or incentive to compete. Such foreclosure

may discourage entry or expansion of rivals or encourage their exit.78

(141) The Non-Horizontal Merger Guidelines distinguish between two forms of

foreclosure: input foreclosure occurs where the merger is likely to raise the costs

of downstream rivals by restricting their access to an important input and

customer foreclosure occurs where the merger is likely to foreclose upstream

rivals by restricting their access to a sufficient customer base.79

(142) In order for foreclosure to be a concern, three conditions need to be met post-

merger: (i) the merged entity needs to have the ability to foreclose its rivals80; (ii)

the merged entity needs to have the incentive to foreclose its rivals81; and (iii) the

foreclosure strategy needs to have a significant detrimental effect on the

parameters of competition on the downstream market (input foreclosure)82 or on

consumers (customer foreclosure). In practice, these factors are often examined

together since they are closely intertwined.83

78 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control

of concentration between undertakings (the Non-Horizontal Merger Guidelines) OJ C 265/6,

18.10.2008, paragraphs 29-30.

79 See Non-Horizontal Merger Guidelines, paragraph 30.

80 See Non-Horizontal Merger Guidelines, paragraphs 33 to 39 and 60 to 67.

81 See Non-Horizontal Merger Guidelines, paragraphs 40 to 46 and 68 to 71.

82 See Non-Horizontal Merger Guidelines, paragraphs 47 to 57.

83 See Non-Horizontal Merger Guidelines, paragraphs 72 to 77.

35

(143) The Commission examined whether the Proposed Transaction could give rise to a

possible risk of input foresclosure for the unbranded (OEM) regular format

printers supplied by the Parties to the detriment of the Parties' competitors active

downstream as suppliers of branded regular format printers. In addition, the

Commission assessed the risk of a possible customer foreclosure for the Parties'

competitors which are active as suppliers of unbranded (OEM) regular format

printers which currently supply HP.

(144) The Commission's analysis focuses on the risk of foreclosure in relation to laser

printers but does not cover inkjet printers. While HP supplies unbranded inkjet

printers on an OEM basis to [customer] and to [customer], based on the Notifying

Party's submission these sales are not EEA sales.8485

5.2.1 Input foreclosure

5.2.1.1 Notifying Party's views

(145) The Notifying Party submits that the Proposed Transaction would not give the

merged entity the ability and incentive to engage in input foreclosure.

(146) First, the Notifying Party submits that the merged entity would not have the

ability to foreclose the downstream customers of Samsung's Printer Business

given that: (1) customers would be protected against any degradation in quality or

interruption of supply through their contractual agreements with Samsung's

Printer Business; (2) Samsung's Printer Business would lack market power in the

upstream market for the supply of unbranded (OEM) laser printers; (3) customers

could deploy counterstrategies in case the merged entity would adopt a

foreclosure strategy, namely (i) turn to other suppliers of unbranded (OEM)

regular format printers (including Canon and Sharp) or (ii) increase their internal

production to the extent they are vertically integrated; and, (4) the absence of

capacity constraints in the industry.

(147) Second, according to the Notifying Party, the merged entity would have no

incentive to engage in any hypothetical input foreclosure strategy since: (1)

contract manufacturing for unbranded (OEM) printers is typical in this industry,

without evidence of such foreclosure attempts; and, (2) the merged entity would

have an incentive post-Transaction to maintain large scale production and

capacity utilization to maximize cost efficiency.

5.2.1.2 Commission's assessment

(148) Based on the Notifying Party's submission, Samsung's Printer Business supplies

A4 laser printers86 on an OEM basis to [customers].87 However, the Notifying

84 In particular, the territorial scope of the agreement between HP and [supplier] is limited to [country]

and [supplier] does not sell A4 inkjet printers outside of [country].

85 The Notifying Party notes that the Proposed Transaction may also give rise to a vertical relationship in

respect of consumables as Samsung's Printer Business provides laser toners, drums, and printer

cartridges to […].

86 In the EEA, Samsung's Printer Business only supplies A4 unbranded laser printers, but not A3.

36

Party notes that Dell is gradually withdrawing from the regular format printer

market.88 In addition, Samsung's Printer Business has supplied a small amount

([…] units) of A3 laser printers to [customer] in [country] and [country], and will

supply further A3 laser printers on an OEM basis to [customer] pursuant to an

agreement entered into in 2016.89

(149) During the market investigation, Konica Minolta stated that it had purchased a

very small amount (less than [0-5]% of annual turnover) from each of the Parties

in 2016.90

(150) The Commission considers that for the reasons set out below, the Proposed

Transaction does not raise serious doubts as to its compatibility with the internal

market with respect to potential foreclosure of Samsung's Printer Business'

(OEM) supplies of regular format printers, regardless of any segmentation.

(151) First, with regard to the ability to engage in input foreclosure, the merged entity

does not appear to have a significant degree of market power in the upstream

market for the supply of unbranded (OEM) printers.

(152) Samsung's Printer Business' market shares for unbranded (OEM) Regular Format

(Laser) Printers (overall for A3 and A4, A3 and A4 separately) are summarized in

the Tables 11 to 15 below. As these tables show, Samsung's Printer Business did

not sell any A3 format unbranded (OEM) laser printers worldwide to any

significant degree. In fact Samsung's Printer Business did not sell any A3 format

unbranded (OEM) laser printers in the EEA. Looking only at a hypothetical A4

format unbranded (OEM) printer segment, Samsung's Printer Business’ shares by

value worldwide were [0-5]% in 2016, while in the EEA they were [0-5]%.

87 While the Notifying Party submits that Samsung's Printer Business supplies unbranded regular format

printers on an OEM basis also to […] (Form CO, para. 370), IDC sales figures submitted by the

Notifying Party for the period 2013-2016 do not show any sales to […]. IDC figures also show a very

small amount of OEM sales of the Samsung's Printer Business […].

88 The official Dell statement is available: http://www.considerit.co.uk/wp-content/uploads/Update-on-

Dells-Imaging-business-letter-EN.pdf

89 The Notifying Party also notes that in [country] and [country], HP works together with [partner] to

provide [product], which is a turn-key solution that bundles [partner] branded printers (supplied as

unbranded (OEM) printers from HP) together with software and PC hardware to enable [partner’s]

customers to operate a [business].

90 See replies to Q1 – questionnaire to competitors, questions 36 and 36.1.

42

KYOCERA

DOCUMENT

SOLUTIONS

GROUP –

[…] [0-5]% […] [0-5]%

KONICA

MINOLTA GROUP

– Unbranded

[…] [0-5]% […] [0-5]%

OKI – Unbranded […] [0-5]% […] [0-5]%

OTHERS –

Unbranded […] [0-5]% […] [0-5]%

TOTAL […] 100% […] 100%

Source: Form CO, based on IDC reports

(157) In a hypothetical segment of A4 format unbranded (OEM) laser printers on EEA-

wide basis, Samsung's Printer Business’ shares by value were [0-5]% in 2016.

Other competitors are Canon Group ([80-90]%), Lexmark ([10-20]%), Kyocera

Document Solutions Group ([0-5]%), and others.

(158) Second, as discussed above, there appear to many competitors to the Samsung's

Printer Business which could provide alternatives to the merged entity. Canon in

particular has a large value share in all segments. Given that, based on the

Notifying Party's submission, [post-Transaction supply strategy of the merged

entity regarding unbranded (OEM) regular format printers].

(159) Third, based on the Notifying Party's submission, Xerox and Toshiba (as well as

other players including Canon, Ricoh, and Konica Minolta) would be vertically

integrated and therefore could expand their respective internal production as an

effective counter-strategy. During the market investigation, Xerox indicated that

it sourced regular format printers unbranded on an OEM basis from Fuji Xerox. 91

(160) Fourth, some of Samsung's Printer Business' customers for unbranded (OEM)

regular format printers already source from other manufacturers. Based on the

Notifying Party's submission, […] already sources unbranded (OEM) printers

from Brother, Fuji-Xerox, Toshiba and Lexmark in addition to Samsung's Printer

Business, while […] also sources unbranded (OEM) printers from Fuji-Xerox and

Lexmark. Thus, even those customers which are not vertically integrated appear

to have alternative sources of supply.

(161) Fifth, with regard to the incentive to engage in any input foreclosure, during the

market investigation it appeared that contract manufacturing for unbranded

(OEM) printers is well established. Around half of the competitors who replied to

the market investigation, indicated that they currently fully or partially source on

an OEM basis from another manufacturer, including for A3 laser printers (Oki,

Konica Minolta and Xerox) and A4 laser printers (Konica Minolta and Xerox).

91 Questionnaire Q1 to competitors, question 37.

43

Oki, for example, has indicated that it purchases A3 multifunction devices from

Toshiba.

(162) One competitor which responded to the market investigation stated that post-

Transaction the merged entity would not have an incentive to stop supplying

unbranded regular format printers to other regular format printer manufacturers,

while most competitors did not express a view on this question. 92

(163) Finally, with regard to the likely impact on prices and choice, during the market

investigation, no competitor which responded to the market investigation stated

that the Proposed Transaction would have an impact on the supply or the price of

unbranded regular format printers in the EEA, while some competitors stated that

the Proposed Transaction would have no impact and most competitors did not

express any view.93 In addition, competitors did not raise any concerns with

regard to input foreclosure during the market investigation.

5.2.2 Customer foreclosure

5.2.2.1 Notifying Party's views

(164) The Notifying Party submits that the Proposed Transaction would not give the

merged entity the ability or incentive to engage in customer foreclosure strategies

for the following reasons: (1) HP constitutes less than […] of the demand for

unbranded (OEM) printers and therefore [supplier], HP's main supplier and a

competitor of Samsung's Printer Business for the supply of unbranded (OEM)

printers, would still have access to over […] of the unbranded (OEM) printer

demand; (2) HP would have no intention of [post-Transaction strategic decision]

but would hope to continue its supply relationship unbranded (OEM) A4 laser

printers with [supplier]; (3) [information on Parties’ capacity] would prevent HP

from [post-Transaction strategic decision] while continuing the current OEM

business94; (4) since Canon, Toshiba and Sharp are all vertically integrated

manufacturers of branded printers as well as unbranded (OEM) printers, they

could brand the printers with their own mark and sell them directly into the

market through their own sales channels.

5.2.2.2 The Commission's assessment

(165) HP purchases unbranded regular format printers on an OEM basis from

[suppliers].95 HP has also recently concluded a new manufacturing arrangement

with [supplier] by which it will purchase future volumes of unbranded (OEM)

regular format laser printers.

92 Questionnaire Q1to competitors, question 37. 93 Questionnaire Q1 to competitors, questions 43 and 44. 94 According to the Notifying Party, if HP were to [post-Transaction strategic decision] capacity of

Samsung's Printer Business' unbranded (OEM) printer supplies, capacity issues could force it to reduce

supply to [customer], [customer], [customer], and/or [customer], which would likewise open up

additional opportunities for suppliers of unbranded (OEM) printers to pursue.

95 Based on the Notifying Party's submission, HP purchases […] million units of unbranded (OEM) laser

printers from […], approximately […] from Samsung's Printer Business and […] units from […].

44

(166) The Commission considers that for the reasons set out below, the Proposed

Transaction does not raise serious doubts as to its compatibility with the internal

market with respect to potential foreclosure of […] (OEM) supplies of regular

format printers, regardless of any possible segmentation.

(167) First, with regard to the ability to engage in a hypothetical customer foreclosure

strategy, HP purchases approximately […] million units of unbranded (OEM)

printers, which corresponds to [30-40]% of the volume of unbranded (OEM)

printers ([…] million units) sold worldwide. Based on the Notifying Party's

submission, while HP expects[post-Transaction strategic decision], HP does not

appear to be able to.96 [information on the Parties’ capacity and post-Transaction

strategic decision], HP would still need to [information on the Parties’ supply]

unbranded (OEM) printers.

(168) Second, on the incentive to engage in customer foreclosure, most competitors

which responded to the market investigation, […], did not express a view on

whether post-Transaction the merged entity would have an incentive to stop

sourcing unbranded regular format printers from other regular format printer

manufacturers.97 Two competitors considered that the Proposed Transaction could

have an impact on HP's current dependency on […]98, while another competitor

responded that the merged entity would not have an incentive to stop sourcing

unbranded regular format printers. 99

(169) Third, with regard to the likely impact on prices and choice, the market

investigation did not reveal any impact that the Proposed Transaction would have

on the supply or the price of unbranded regular format printers in the EEA.100

Furthermore, competitors which replied during the market investigation, […],

have not raised any substantiated concerns with regard to customer foreclosure.

6 CONCLUSION

(170) For the above reasons, the European Commission has decided not to oppose the

notified operation and to declare it compatible with the internal market and with

the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of

the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed)

Margrethe VESTAGER

Member of the Commission

96 According to the Notifying Party: (1) the total capacity of Samsung's Printer Business' manufacturing

facility (currently located in Weihai) […]; (2) the total capacity of the manufacturing facility in Weihai

for complete printers is approximately […] units per year and its capacity utilization would be around

[…] units per year.

97 Questionnaire Q1 to competitors, question 39. 98 Questionnaire Q1 to competitors, question 39.1. 99 Questionnaire Q1 to competitors, question 39. 100 Questionnaire Q1 – to competitors, questions 43 and 44.